Insights: Earnings Calls – Best Practices for a Captive Audience
Quarterly earnings reporting is without question one of the highest-impact marketing events for a public company and rightly deserves meticulous preparation. Each call represents a unique opportunity for the leadership team to deliver tightly drafted commentary to a captive audience. As we head into an earnings season shrouded in a pandemic and a global recession, with social distancing and leveraged technology the norm, the Rose & Co. team shares some best practices to ensure an impactful and well-executed call.
Work Closely With Your Call Provider and Operator, Lever their Technology
In today’s virtual world, the number of call and webcast providers has grown significantly. Each has its own unique angle, but reliability should remain key focus; there is no excuse for dropped calls, dead air or capacity issues. With the continued absence of in-person conferences and events, we expect call attendance to be unusually high again this quarter. Your provider is going to be swamped with demand, so get ahead of their other clients, contact them well in advance to set up the pre-recording and call, and request plenty of extra line capacity to ensure no one is left unable to join.
Most providers offer online dashboard controls that allow you to manage the lines live; who has dialed into the call, who has questions, and importantly, who do you want to prioritize or remove from the question queue. Ahead of the call, provide your operator with a copy of the final script, any custom introductions, and where possible, notes on the correct pronunciation of speakers’ and covering analysts’ names to minimize transcript errors. After the call, your provider should be able to share a participant list. This is of course valuable information to cross-reference against your internal IR databases and can provide a wealth of knowledge and insight into interest in your company. If there are institutional names or sell-siders you haven’t yet met, reach out to them and offer an introductory call with the IR team.
Check Your Acoustics, Be Conscious of Time Allocation
Echoes and feedback on the line can ruin a good earnings call, so check the sound dynamics of your war room well in advance. The large board room with cathedral-like ceilings is unlikely to have better acoustics than the small meeting room with the broken thermostat. Similarly, have the team slow down. No, even slower. This isn’t a fireside chat, the speaker is not visible, so keep the spoken word audible and well enunciated both for the audience and the transcript. Sticking with the theme of speed, consider your timing and how best to deploy the time devoted to the call. Do you want to maximize questions, deliver a message, or share thought leadership on your space? An even split of 30 mins for remarks and 30 mins for questions is common, but consider your current results and market. If there is a specific market dynamic your CEO would like to address, you may want to allot more time to the script. Conversely, if you suspect your analysts may have a wide range of questions this quarter, be conscious of this and allocate more time to the Q&A accordingly.
Avoid Industry Congestion, be Strategic with Timing
Be strategic when selecting the date and time of your call by keeping track of your peers’ announcements, especially the larger ones. No one wants to overlap companies from the same industry as you risk splitting both your investor and analyst audience. If your company is the one taking a question from the analyst’s intern, it’s clear where priorities lie. Give investors plenty of time to update calendars, announce your call details 3-4 weeks in advance and push the announcement to your analysts and top investors. We recommend publishing your earnings release after market close the night before the call (~4:30pm ET), with the call itself held before the market opens (~8:00am ET). Not only does this give your stakeholders time to digest the results and compose thoughtful questions, but it also eliminates the prospect of your results standing out in public during trading hours, with no surrounding commentary or explanation.
An Earnings Presentation Should Support, Not Lead
Visual materials can provide great support for your speakers, but without careful deployment can cause distraction from the prepared remarks. We are proponents of including slides where possible, particularly when the slides are progressed by the speaker. Keep the content short and clear with only a handful of slides per speaker. A reduced form of your full investor presentation is ideal, and be sure to have the materials available on your website concurrent with your earnings release if practicable. The additional time will provide opportunity for investors and analysts to digest results and updates and compose questions for the call, deepening their potential for engagement.
Remember the earnings call is not like a conference presentation, your team won’t have the luxury of seeing the ‘whites of their eyes’ and addressing investor concerns or queries directly. Be sure to provide summary slides, establishing and reiterating the key messages of the presentation. To ensure your listener can follow along, include slide number references in the prepared remarks to guide the audience. This also aids navigation should you need to refer back to a slide during the Q&A session. Further, be cautious if using the earnings call presentation to showcase new or significantly updated content. Although you have a captive audience, new material with an educational burden can cause confusion, soak time, distract, or worse of all, be misinterpreted. Hold onto radically new materials until a more suitable forum like an investor day, an industry conference, or when a special-purpose conference call presents itself.
Present a United, Coherent Leadership Team
While the pace of earnings preparation can be brisk, internal alignment around earnings scripts is critical. It is too easy to fall into a routine where individual scripts are drafted in a vacuum then pasted together just before the call. This can have the effect of reducing the natural flow of the commentary and, more importantly, dilute the opportunity to present a unified and aligned leadership team. Well ahead of the call date, sit the team down with IR, communications, finance, and any other relevant functions to ensure everyone has an understanding of the latest corporate messaging, narratives, and how they can be best wrapped around the quarter’s results. Balance messaging and commentary appropriately across your leadership teams’ remarks; seamless transition of remarks between speakers presents a powerful message and demonstrates a team that can work together to a common goal.
As with everything in life, preparation is the foundation of a quality call. Whether the team chooses to pre-record their remarks in advance or read their scripts live, there is no excuse for a poorly rehearsed call. Pre-recording eliminates much of the stress that causes word stumbles and slips-ups. Retakes are edited in, and not having to read a script on the live call allows ample mental preparation time to acclimatize ahead of the sparring of the Q&A session. In a worst case, where current events overtake your recording, you can always host the call live anyway. Whatever the decision, encourage speakers to read, re-read and re-read their script again, aloud, and ideally with everyone together. Identify the tongue-twister sentences and reword them. Remember, this is not a legal or technical document, and there is no need to challenge anyone’s vocabulary. Keep things in simple plain English.
Preempt and Address Your Questions, Manage Q&A Strategically
One of the most powerful plays in earnings season is to know precisely what is on your stakeholders’ minds. Your IR team should already be working hand in glove with the sell-side, but be sure to check in ahead of quiet periods. Understand their drivers, what are their concerns this quarter, what are they likely to ask? If you can preempt and cover the detail in the prepared remarks, it ensures your team looks prepared and is covering all bases.
Inbound questions can be a source of significant anxiety, so as a best practice internal teams should maintain a comprehensive rolling book of questions and answers that continues to evolve the closer you get to your call date. We’ve seen these range from single pages to full tomes of reference material, so find what works best for you. A simple excel file organized thematically often works best to track and highlight key questions of the day, but anything that keeps the team ready to answer (or bridge away from) challenging questions will demonstrate competence and leadership to your audience. Ensure your leaders have any necessary data on hand, but don’t be hesitant to delegate. A CEO ‘calling on’ their head of field operations or similar to answer a highly specific or technical question demonstrates not only an effective leadership with strong relations through levels, but also an awareness of limitations. Even the most knowledgeable leader has limits and can best show competence by introducing someone closer to the action to cover the detail.
Stay aware of the parties that appear in your Q&A line up and be sure to effectively use your provider’s dashboard system to identify inbounds. Exercise caution with buy-siders and private investors though and save them for after your sell-side analysts have held the mic. A ‘friendly’ institution may be able to direct conversation in the right way, but many are personally invested in your company and may seek to discuss agendas that derail the conversation and soak up valuable time.
In Conclusion
Earnings calls are too often perceived as a necessary evil in the IR space. In reality, your call presents a huge opportunity in the IR calendar to walk stakeholders through the quarter’s results with live commentary and to demonstrate alignment and competence of leadership. We encourage your teams to keep the above points in mind as you prepare for a smooth event. Stay close to your sell-side analysts before and after, and use the call as an opportunity for your leadership to present a united front with the widest virtual audience possible and keep the wider market updated on your performance and progress.